GarageBand + Capo on Guitar?

Hello! So, GarageBand starts you in Cmaj, I believe. I'm recording a song with multiple parts on my guitar which has a capo on the 4th fret. However, when I record, it sounds off. I also wanted to use my MIDI keyboard to create sounds, but it doesn't sound right with the guitar. Is it because of the capo and GarageBand being on Cmaj? What should I do to change this and get the correct sound?

Thank you,

Brittany